News

June 17, 2011

Supermarket watchdog needs teeth to protect small suppliers

A new supermarket ombudsman will “lack teeth” unless it has the power to fine big retailers for mistreating small suppliers, the Forum of Private Business (FPB) has said.

The Grocery Code Adjudicator (GCA) is due to be established next year to monitor the relationship between supermarkets and suppliers. The watchdog is being set up to resolve disputes between the two groups, following concern that supermarkets are treating small suppliers unfairly.

However, the FPB’s head of campaigns Jane Bennett said that unless the ombudsman is able to impose financial penalties on retailers, it would “lack teeth” and could leave small suppliers unprotected.

“Mistreatment of smaller suppliers by supermarkets is a constant, pressing problem and awarding the ombudsman powers to impose financial penalties would be more likely to ensure compliance of the code,” she said. “We have to hit supermarkets that flout their responsibilities where it hurts.”

The Association of Convenience Stores (ACS) agreed with the FPB. “A strong GCA would have benefits right across the retail sector,” said ACS spokesman Shane Brennan.

“There is a serious knock-on effect for smaller suppliers if big supermarket names are abusing their position – for instance, by knocking down prices paid to suppliers, or overcharging to stock products in stores,” he added.

Brennan added that the GCA should also be responsible for protecting third-party suppliers. “We’re concerned that the ombudsman is only going to deal with disputes between large retailers and their direct suppliers, rather than protecting smaller operators further down the supply chain,” he said. “We want to make sure that all parties can make complaints and be heard.”

According to the Department for Business, Innovation and Skills (BIS) it was “unlikely” that the draft GCA Bill would be amended in the short-term to allow the GCA to impose fines. “The main deterrent for retailers will be the fact they are publicly named and this is seen as sufficient for now,” said BIS spokesman Joshua Coe.

However, financial penalties could be introduced at a later date, as “a back-up”, he said. Coe also confirmed that under existing proposals, third-party suppliers would be able to make complaints to the ombudsman in confidence. “They may be afforded less protection under the Code than direct suppliers, but they will still be able to raise issues,” he said.

No fixed date has yet been given for implementation of the Bill, which is currently going through a series of hearings.

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